Food delivery apps like Zomato & Swiggy, and Cloud kitchens brought within the restaurant services, liable to pay GST

By:

Background:

The GST Council’s 45th meeting was held on September 17, 2021 in Lucknow under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The GST Council has inter-alia made the recommendations to make e-commerce operators like Swiggy, Zomato within the ambit of restaurant services and make them liable to pay the tax.

Following Notification has been issued in respect of the same.

Notification:

The CBIC vide Notification No. 17/2021- Central Tax (Rate) dated November 18, 2021 amended Notification No. 17/2017- Central Tax (Rate) dated June 28, 2017 to bring food delivery apps like Zomato & Swiggy, and Cloud kitchens brought within the restaurant services in following manner:

“…In case of the following categories of services, the tax on intra-State supplies shall be paid by the electronic commerce operator –

(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle, omnibus or  any other motor vehicle;

(ii) services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.

(iii) services by way of house-keeping, such as plumbing, carpentering etc, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.

(iv) supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises

Explanation.- For the purposes of this notification,-

(a) “radio taxi” means a taxi including a radio cab, by whatever name called, which is in two-way radio communication with a central control office and is enabled for tracking using Global Positioning System (GPS) or General Packet Radio Service (GPRS);

(b) “maxicab”, “motorcab”, “motor cycle”, “motor vehicle” and “omnibus” shall have the same meanings as assigned to them respectively in clauses (22), (25), (27), (28) and (29) of section 2 of the Motor Vehicle Act, 1988 (59 of 1988)

(c) specified premises means premises providing hotel accommodation service having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent

This Notification shall come into force w.e.f. January 1, 2022.

Similar notifications have been passed under Integrated Goods and Services Tax Act, 2017 (“IGST Act”) and Union Territory Goods and Services Tax Act, 2017 (“UTGST Act”).

CGST (Rate) Notification: https://www.a2ztaxcorp.com/wp-content/uploads/2021/11/Notification-17-2021-CGST.pdf

IGST (Rate) Notification: https://www.a2ztaxcorp.com/wp-content/uploads/2021/11/Notification-17-2021-IGST.pdf

UTGST (Rate) Notification: https://www.a2ztaxcorp.com/wp-content/uploads/2021/11/Notification-17-2021-UTGST.pdf

Our comments:

Accordingly, CBIC vide Notification No. 16/2021- Central Tax (Rate) dated November 18, 2021 amended Notification No. 12/2017- Central Tax (Rate) dated June 28, 2017 (“Services Exemption Notification”) to insert proviso effective from January 1, 2022 in the following manner:

Sl. No.

Heading Description of Services Rate

Condition

15

Heading 9964 

Transport of passengers, with or without accompanied belongings, by –

(a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal;

(b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or

(c) stage carriage other than air-conditioned stage carriage.

Provided that nothing contained in items (b) and (c) above shall apply to services supplied through an electronic commerce operator, and notified under sub-section (5) of Section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017);

Nil

Nil

17

Heading 9964

Service of transportation of passengers, with or without accompanied belongings, by-

(a) railways in a class other than-

(i) first class; or

(ii) an air-conditioned coach;

(b) metro, monorail or tramway;

(c) inland waterways;

(d) public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and

(e) metered cabs or auto rickshaws (including e-rickshaws).

Provided that nothing contained in items (b) and (c) above shall apply to services supplied through an electronic commerce operator, and notified under sub-section (5) of Section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017);

Nil

Nil

The above-mentioned amendment may help the Government to increase GST collection by including small restaurants within its ambit whereas on the other hand, the small restaurant below threshold limit will now have additional GST cost added to their service.

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